🟪 Crypto’s Next Debate: Abundance vs. Scarcity

Crypto’s Next Debate: Abundance vs. Scarcity

There’s a philosophical fault line between abundance and scarcity that cuts across many disciplines, like economics (capitalist vs. statist), politics (individualism vs. collectivism), and psychology (growth mindset vs. fixed mindset).

Most recently, it’s become core to the debate around AI (effective accelerationism vs. doomerism).

It may soon be coming for crypto, too.

At the moment, the central debate in crypto is “modular” vs. “monolithic” — should blockchains be all-purpose, like Solana? Or specialized, like Celestia? Or something in-between, like Ethereum?

It's pretty geeky and highly technical, so it’s hard for non-experts to have an opinion and normally, none would — how many people, even within crypto, genuinely understand how today’s blockchains work? 

Not many, but that doesn’t stop us because in crypto everything is tradeable right from the start, so we’re incentivized to form opinions about things we don’t fully understand.

Imagine if, in the early days of the internet, HTTP had been a tradeable token — everyone would have had fiercely held opinions about the technical nuance of things like file transfers, hypertext linking, and client-server architecture.

Most of those opinions would likely have been ill-informed — even among those who correctly backed HTTP, most probably would have done so not because they understood the tech but because they liked the memes.

So I’m not convinced that most of the current debate around modular vs. monolithic is particularly productive.

If the debate shifts to abundance vs. scarcity, however, it will get less technical and more accessible.

Why do I think it might? Partly because we've been here before. 

Fields of dreams

The great block size wars that divided the Bitcoin community in 2017 were essentially about abundance (big blocks) vs. scarcity (small blocks). 

No great technical know-how was required to participate in that fateful debate — you only had to have an opinion on whether Bitcoin should be optimized for making payments or for storing value.

Scarcity (and therefore store of value) won out in 2017 largely because, at the time, there was a trade-off between abundance and decentralization.

That appears to no longer be the case: “Data availability sampling” will allow blockchains to be verifiable on consumer hardware, like smartphones, which means we can have our abundance without sacrificing our decentralization.

This makes the abundance vs. scarcity debate worth revisiting.

But if we can have both abundance and decentralization, what then is there to debate about? More is always better, right?

The debate, I think, becomes whether blockspace can simultaneously be expensive enough to have value and cheap enough to be useful.

This is less about the tech (which will develop in both directions) and more about crypto’s investment prospects and potential use cases, which anyone can have a considered opinion on — and everyone might have to, because blockchains don’t work unless their tokens have value.

Celestia, the data availability blockchain promising crypto abundance, is secured by the TIA token and therefore dependent on the TIA token being valuable enough to provide security.

That is not a concern at the moment as TIA is currently very valuable. But Celestia’s mission is to make blockspace something close to free, and if blockspace is close to free, Celestia will have to sell a lot of it to make any money.

In the latest episode of 0xResarch, Blockwork analyst Dan Smith estimates that at its current max capacity, Celestia would generate only about $5 million of fees a year.

That is not a large number and yet, to achieve it, Celestia would need to attract 65 times the number of transactions that are currently being posted to Ethereum.

This is of course entirely possible (build it and they will come) but also highly speculative.

Worryingly, $5 million is not enough to justify Celestia’s current FDV of $15 billion, but more importantly, it’s presumably not enough to secure the chain either.

A risk to Celestia may therefore be that it could fail to strike a balance between taking enough fees that its token has value, and taking few enough fees that huge new use cases emerge.

I say “may” because Celestia might not need fees to make it viable (it might, for example, achieve a monetary premium) and it might not even need to be a blockchain (in which case no one would be talking about it). 

But Dan’s numbers are, to me, a first warning sign that blockchain technology may produce so much blockspace that it’s not valuable enough to be viable.

You might disagree! 

You might instead argue that if the cost of blockspace gets close to zero, close to everything will happen on a blockchain — and you could well be right: Quantity, after all, has a quality all its own.  

But that, I think, is a debate we will soon have to have.

To participate in that debate, you’ll only need an opinion as to whether enough use cases will be found to make ultra-cheap blockspace economic. 

For now, that is anyone’s guess, which means that, unlike modular vs. monolithic, anyone’s guess will be as valid as anyone else’s. 

So let’s get this debate started: submit your guess here: [email protected]o.

― Byron Gilliam

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